All 3 Singaporean banks (DBS, UOB, and OCBC) have since released their half yearly results for FY2020, and I have provided a summary (along with my thoughts) in separate posts – in case you’ve missed them, you can find them below:

Today, I will be putting their results side-by-side and compare which bank (among the three) had the most resilient set of financial results, and also which bank is currently the “cheapest” at the moment (based on their valuations) computed from their closing prices yesterday (12 August 2020.)

Let’s begin…

Key Financial Results

2Q FY2019 vs. 2Q FY2020:

On a quarter-on-quarter basis, as I only have the total income and net profit attributable attributable to shareholders, I will be looking at these 2 financial statistics, and compare which bank had the best second quarter results:

Total Income:

  • DBS’ total income grew by 0.5%, where it went up from S$3.71b to S$3.73b.
  • UOB’s total income fell by 12.5%, from S$2.58b to S$2.26b.
  • OCBC’s total income edged up 0.3%, from S$2.62b to S$2.63b.

Conclusion: DBS saw the best improvement in terms of total income growth on a q-o-q basis, followed by OCBC, while UOB’s total income growth saw a decline in the same time period.

Net Profit Attributable to Shareholders:

  • DBS’ net profit attributable to shareholders dropped 21.8% from S$1.60b to S$1.26b.
  • UOB’s net profit attributable to shareholders tumbled 39.8% from S$1.17b to S$0.70b.
  • OCBC’s net profit attributable to shareholders plummeted 40.3% from S$1.22b to S$0.73b.

Conclusion: While all 3 banks saw their net profit attributable to shareholders fall on a q-o-q basis, mainly due to huge allowances for credit and other losses being provisioned, DBS’ net profit attributed to shareholders saw the smallest percentage of drop, followed by UOB, and then OCBC.

1H FY2019 vs. 1H FY2020:

Net Interest Income:

  • DBS’ net interest income inched up 1.1% from S$4.74b to S$4.79b.
  • UOB’s net interest income fell 5.9% from S$3.24b to S$3.04b.
  • OCBC’s net interest income dipped 0.3% from S$3.12b to S$3.11b.

Conclusion: Among the 3 banks, only DBS saw its net interest income go up on a y-o-y basis, while the other 2 banks saw its net interest income decline in the same time period.

Net Fee and Commission Income:

  • DBS’ net fee and commission income inched up 0.7% from S$1.50b to S$1.51b.
  • UOB’s net fee and commission income dropped 5.0% from $1.01b to S$0.96b.
  • OCBC’s net fee and commission income weakened by 2.9% from S$1.02b to S$0.99b.

Conclusion: Again, only DBS saw its net fee and commission income record improvements on a y-o-y basis, while the other 2 banks saw declines.

Other Non-Interest Income:

  • DBS’ other non-interest income skyrocketed 42.2% from S$1.02b to S$1.45b.
  • UOB’s other non-interest income fell by 10.8% from S$0.74b to S$0.66b.
  • OCBC’s other non-interest income fell by 11.3% from S$1.15b to S$1.02b.

Conclusion: In terms of other non-interest income, once again, only DBS saw improvements in this business segment, while the other 2 banks recorded declines on a y-o-y basis.

Total Income:

  • DBS’ total income went up by 6.8% from S$7.26b to S$7.75b.
  • UOB’s total income fell 6.5% from S$4.99b to S$4.67b.
  • OCBC’s total income went down 3.4% from S$5.29b to S$5.12b.

Conclusion: Just like its net interest income, net fee and commission income, and other non-interest income, only DBS saw growth in its total income on a y-o-y basis, while the other 2 banks saw their total income weakened as a result of declines in their three business segments.

Net Profit Attributable to Shareholders:

  • DBS’ net profit attributable to shareholders fell 25.9% from S$3.25b to S$2.41b.
  • UOB’s net profit attributable to shareholders declined 29.8% from S$2.21b to S$1.56b.
  • OCBC’s net profit attributable to shareholders plummeted 41.8% from S$2.45b to S$1.43b.

Conclusion: While all 3 Singaporean banks saw their net profit attributable to shareholders fell on a y-o-y basis (no thanks to huge increases in allowances for loans and other assets), DBS saw the smallest percentage of drop (by 25.9%), followed by UOB (by 29.8%), and then OCBC (by 41.8%.)

Question: Which Bank Recorded the Most Resilient Set of Financial Results:

Answer: It is very obvious from the above that, both on a q-o-q, as well as on a y-o-y basis, DBS is the clear winner here, with UOB and OCBC lagging behind.

Key Financial Ratios

In this section, we will be looking at some of the key financial ratios recorded by the 3 Singapore banks for the second quarter (ended 30 June), compared against the first quarter (ended 31 March) in terms of their difference (in percentage points):

Net Interest Margin:

  • DBS’ net interest margin fell 0.24pp from 1.86% in Q1 to 1.62% in Q2.
  • UOB’s net interest margin dropped 0.23pp from 1.71% in Q1 to 1.48% in Q2.
  • OCBC’s net interest margin declined 0.16pp from 1.76% in Q1 to 1.60% in Q2.

Conclusion: While all 3 Singapore banks saw declines in their net interest margins, OCBC’s drop was the smallest (by 0.16pp), followed by UOB (by 0.23pp), and then DBS (where its net interest margin fell by most at 0.24pp.)

Return on Assets:

  • DBS’ return on assets inched down 0.01pp from 0.78% in Q1 to 0.77% in Q2.
  • UOB’s return on assets fell 0.18pp from 0.83% in Q1 to 0.65% in Q2.
  • OCBC’s return on assets edged up 0.02pp from 0.67% in Q1 to 0.69% in Q2.

Conclusion: OCBC is the only bank which saw its return on assets improve (albeit slightly by 0.02pp), while the other 2 banks saw declines (with DBS at 0.01pp, and UOB by 0.18pp.)

Return on Equity:

  • DBS’ return on equity improved by 0.6pp from 9.2% in Q1 to 9.8% in Q2.
  • UOB’s return on equity fell 1.7pp from 8.8% in Q1 to 7.1% in Q2.
  • OCBC’s return on equity went up by 0.2pp from 6.0% in Q1 to 6.2% in Q2.

Conclusion: Both DBS and OCBC saw their return on equity improve (by 0.6pp and 0.2pp respectively.) Only UOB saw its return on equity dip 1.7pp in the same time period.

Non-Performing Loans Ratio:

  • DBS’ non-performing loans ratio edged down 0.1pp from 1.6% in Q1 to 1.5% in Q2.
  • UOB’s non-performing loans ratio remained the same at 1.6% in Q1 and Q2.
  • OCBC’s non-performing loans ratio inched up slightly by 0.1pp from 1.5% in Q1 to 1.6% in Q2.

Conclusion: DBS is the winner here, as its non-performing loans edged down slightly, with UOB coming in second with no changes, while OCBC saw its non-performing loans ratio edging up by 0.1pp to 1.6%.

Question: Which Singapore Bank had the Most Resilient Set of Key Financial Ratios?

Answer: In my opinion, it’s a tie between OCBC and DBS – as the former edged out the latter in terms of smaller drop in its net interest margin, as well as improvements in its return on assets, while the latter edged out the former in terms of improvements in its return on equity, as well as in its non-performing loans ratio.

Valuations

Finally, let us look at the valuations of the 3 Singapore banks based on their closing prices yesterday (12 August):

DBSUOBOCBC
Share PriceS$21.01S$19.89S$8.86
P/E Ratio9.718.908.00
P/B Ratio1.070.880.84
**Dividend Yield4.14%3.92%3.59%

** In terms of dividend payouts, it is based on a projection of their dividend payouts in FY2020 (capped at 60.0% of their total payouts in FY2019), with DBS’ at 87.0 cents (payout of 33.0 cents in Q1, and 18.0 cents in Q2, Q3, and Q4), UOB at 78.0 cents (60% of their total payout of 130.0 cents in FY2019), and OCBC at 31.8 cents (60% of their total payout of 53.0 cents in FY2019.)

Conclusion: Among the 3 banks, OCBC seem to be the cheapest in terms of valuations, due to the bank having the lowest P/E as well as P/B ratios, followed by UOB, and then DBS (which has the highest P/E and P/B ratios among the 3 banks, but at the same time, its dividend yield is also the highest.)

In Closing

Taking a look at the 3 banks’ financial results and key financial ratios, DBS in my opinion had the best set of results, followed by OCBC (in terms of having the best set of financial ratios), and finally UOB.

However, in terms of their valuations, OCBC is the “cheapest” among the 3 Singapore banks, as it has the lowest P/E and P/B ratios.

Finally, having said that, please take note that the above is purely for educational purposes only. They do not imply any buy or sell recommendations for any of the 3 Singapore banks. As always, please do your own due diligence before you make any investing decisions.

Disclaimer: At the time of writing, I am a shareholder of DBS Group Holdings, United Overseas Bank Limited, and Overseas-Chinese Banking Corporation.

 

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